Global Perspectives: G20 Leaders Summit

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Council of Councils global perspectives roundups gather opinions from experts on major international developments. In this edition, members of five leading global think tanks sum up the outcomes of the G20 summit, held in Buenos Aires, Argentina, from November 30 to December 1.

If the G20 is the steering committee for the global economy, the latest summit, in Argentina, lurched all over the map. The International Monetary Fund (IMF) has for more than a year been sending a clear message of growing risks to global growth and the priority was reducing trade-restricting actions. For those expecting leadership from this group on this challenge, this was a disappointing event. It further strengthens the voices of those who fear that the G20 has lost its way and is becoming nothing more than an expensive talk shop.

"Leaders left Buenos Aires having ducked the world’s most important economic issue."

There were many reasons for this outcome. In particular, the U.S.-China trade dispute, addressed in the post-summit dinner meeting between U.S. President Donald J. Trump and Chinese President Xi Jinping, sucked out a lot of the oxygen. Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman were additional distractions. Brazilian President Michel Temer and Mexican President Enrique Pena Nieto were present but lame ducks. The same could be said for new Australian Prime Minister Scott Morrison. German Chancellor Angela Merkel missed the first day because of plane difficulties. French President Emmanuel Macron and British Prime Minister Theresa May had other pressing issues on their minds, and Trump skipped some of the proceedings. Reports suggest that the leaders’ discussions were rather perfunctory as leaders were not ready to engage Trump. Argentine President Mauricio Macri, chair of the discussions, was not in a position to be forceful, given the delicate state of the Argentine economy.

The fighting fell to sherpas, the chief policy aides who spent three nights wrestling with the draft communiqué, which brought out huge disagreements, notably with the United States on trade, migration, and climate change. The final communiqué does capture agreements on secondary issues that emerged from the long preparatory process. But on the big issues, leaders chose not to make a fight of them. On trade, they accepted the weakest language ever seen in a G20 communiqué, dropping their long-standing commitment to resist protectionism. On migration, they contented themselves by saying they would continue the dialogue. On climate change, they repeated that the nineteen members excluding the United States would continue their support for the Paris Agreement.

These summits cannot always have earth-shattering outcomes. Perhaps those who argue that these summits exist primarily to deal only with major crises have it right and ambitions must be reined in at other times. However, Christine Lagarde, managing director of the IMF, clearly articulated the challenges facing the slowing global economy and identified trade protectionism as the number one issue to be addressed. Leaders left Buenos Aires having ducked the world’s most important economic issue.

Elizabeth Sidiropoulos, South African Institute of International Affairs (South Africa)

What everyone feared did not materialize. The tariff war between the United States and China has been put on hold—perhaps in deference to the holiday season. But the respite is likely to be short-lived, and the messaging on trade at the G20 summit was troubling. The rhetoric foregoing protectionism was finally abandoned. Symbolically it was a shift, but in reality it was an acceptance that the emperor has no clothes and has not had some for years. The WTO has tracked the imposition of protectionist responses since the global financial crisis, and every year it notes the imposition of trade-restricting measures by many G20 members. From October 2017 to May 2018 thirty-nine new measures were implemented.

Additionally, the leaders’ declaration finally acknowledges that the WTO requires reform and states that progress will be reviewed in mid-2019. Yet this language obscures significant differences in the desired outcomes of G20 members.

Leaders from the major emerging economies known as the BRICS—Brazil, Russia, India, China, and South Africa—meeting on the sidelines of the summit, issued a strong statement on the importance of upholding multilateralism and reaffirmed support for “transparent, open and inclusive international trade.” While supporting reform of the WTO to make it more relevant and effective, the BRICS emphasized that the core values must be preserved and the interests of all members, the developing world in particular, should be reflected.

For some developing countries, the breakdown of the Doha Development Round some years ago had already signaled the growing dysfunction of the WTO-led system, where legitimate demands by the developing world have been sidelined. However, the developing world still regards it as the supreme body for international trade, capable of protecting smaller players by enforcing common rules.

"The trade tensions that dominated the headlines represent a threat to the multilateral system."

The summit in Argentina produced many outcomes, including endorsing a roadmap to infrastructure as an asset class and a sustainable finance report focusing on voluntary options to support the deployment of sustainable private capital. However, the trade tensions that dominated the headlines represent a threat to the multilateral system as a whole and a risk of descending into unilateralism and self-interested actions. There are still many in the G20 members that wish to uphold, albeit with reforms, a rules-based order, but at what point will the ship take in more water than it can manage to keep afloat? In a speech during the BRICS informal meeting, South African President Cyril Ramaphosa emphasized that the G20 is expected to show leadership in light of current global trade tensions. While the United States’ turn away from multilateralism makes this more difficult, the other G20 members, those that believe that the body’s legitimacy derives from being globally responsible, will have to become more vocal. The world cannot afford a lowest common denominator approach to global governance and international cooperation.

Laura von Daniels, German Institute for International and Security Affairs (Germany)

After ten years of G20 meetings, world leaders must find a way to deal with two adverse conditions: a disruptive U.S. president and the looming departure of German Chancellor Angela Merkel. The chancellor has become to many the last hope for fact-based, rational international decision-making.

With or without Merkel, who arrived late to the G20 summit due to aircraft problems, development on agenda items was stagnant. Progress was particularly poor on three policy areas Merkel had made a priority during Germany’s G20 presidency last year: sustaining the open global trade system, advancing climate policy, and improving Africa’s integration into the global economy. In addition, no solution was found to stop Russia from threatening Ukraine and interfering in its domestic politics. However, Merkel was able to persuade Russian President Vladimir Putin to continue negotiations in the Normandy group—France, Germany, Russia, and Ukraine—at the foreign policy advisor level.

While all countries except the United States declared their willingness to keep the Paris Agreement alive, global initiatives to reach the targets have stalled. Yet, stagnation could even be seen as positive, given that in recent months two more G20 members—Turkey and Brazil—have sent mixed signals, suggesting they could exit the agreement.

"[Leaders] are no longer able to unanimously declare their support for the existing open international trade order."

On trade, the G20 leaders agreed on the need to reform the WTO. However, they are no longer able to unanimously declare their support for the existing open international trade order. If they cannot agree on this, how are they going to tackle any problem of global importance, including how to engage more with Africa—a continent whose interests remain essentially unrepresented in the G20 format? Argentina’s G20 presidency did little to follow up on last year’s launch of the “Compact with Africa,” an investment program that asked all G20 members to sign investment facilitation agreements with African countries, and the hope now is that Japan’s government will pick up the task during its G20 presidency next year.

The announced ninety-day “truce” between Chinese President Xi Jinping and U.S. President Donald J. Trump cannot conceal the destruction already created by a heated trade conflict between these world powers. The lack of detail on China’s commitment to increase imports from the United States and the timeline for policy changes requested by the United States have led some investors to doubt that the truce is sustainable.

There are two conclusions, one for the world and one specifically for German foreign policy. For the world, it is still possible to maintain the global liberal order even in the absence of the hegemon that created it and sustained it for almost seven decades. What is needed are leaders willing to stand tall and capable of playing their cards wisely, working closely with friends but also cooperating with more difficult partners. For Germany, to continuously have a positive effect on world politics, it needs to make sure someone nearly as smart and savvy as Merkel, who is due to step down in 2022 but could do so much earlier, follows in her footsteps.

Ye Yu, Shanghai Institutes for International Studies (China)

This year’s G20 summit aimed to “build consensus for fair and sustainable development.” As expected, the leaders of the United States and China reached an agreement to pause the escalation of tariffs. This was a great success, though the consensus was more about China purchasing “a very substantial” amount of agriculture, energy, and industrial goods from the United States. As for deeper institutional and trade issues, the two sides will return to the negotiating table, aiming to settle an agreement within ninety days. But the opposing views on regulating their economies and sharing global responsibilities cannot be settled within a few months. At best, some principles could be agreed on, and bilateral relations could continue to muddle through.

For the largely sidelined G20 plenary meeting that concluded before the meeting between Xi and Trump, there was much less urgency. The IMF warned about the rising pressure of downside risks, from financial vulnerabilities to geopolitical tensions, for the world economy in the next few years. But there was not a real crisis like that of ten years ago to unite the G20 to take immediate action. The sign that the U.S. Federal Reserve will phase out rate hikes relieved concerns about capital outflows. More fiscal easing policies are still possible from major economies.

Bigger differences were spelled out in more deeply rooted, structural issues. The G20 declaration stressed the importance of “international trade and investment” for generating growth and jobs, but not the value of the “trade system.” Nor did it renew any commitment to fight against trade protectionism. The agenda shifted to “the necessary reform of the WTO to improve its functioning,” but it did not identify any priorities.

"A clear G19+1 divide was laid out in the G20 declaration."

Divisions were more straightforward on climate change. A clear “G19+1” divide was laid out in the G20 declaration. “Signatories to the Paris Agreement” recommitted their support for the accord, while the United States reiterated its decision to withdraw from the agreement.

Likely the biggest use of the G20 in noncrisis years is its uselessness. As the G20 declaration stated, this year’s agenda focused on “people-centered” issues, including “the future of work, infrastructure for development, a sustainable food future, and a gender mainstreaming strategy across the G20 agenda.” The discussion on the digital economy was a highlight of this year’s summit, with the leaders adopting the Menu of Policy Options for the Future of Work for countries to draw on. The discussions on how to make new technologies work for everyone are useful for fostering long-term consensus for further sustainable development. There has long been criticism about the inefficiency of incorporating more development issues into the G20 agenda. This may prove impossible and illegitimate considering the challenge of rising populism. Above all, global governance is about providing more access for marginalized interests to express their views. As the center of the transgovernmental network, the G20 should play a larger role in fostering long-term consensus.

Pablo Ava and Carola Ramon Berjano, Argentine Council for International Relations (Argentina)

A highly unusual—though small—earthquake struck the outskirts of Buenos Aires as Argentine President Mauricio Macri was greeting world leaders at the opening of the G20 summit. This shaky start could have been a harbinger for the tricky meetings ahead. The summit took place among increased tensions between the United States and China, Saudi Arabia and Turkey, the United States and Russia, and the European Union and the United Kingdom, as well as increasing doubts about the functioning of multilateral institutions.

Argentina adopted a strategy as a builder of consensus, which meant that in addition to working toward reaching a final communiqué, it also acted as an honest broker to avoid disagreements on the most controversial issues. This strategy was quite successful—in fact, more than originally expected. The Buenos Aires consensus highlighted the need to “work together to improve a rules-based international order that is capable of effectively responding to a rapidly changing world.” Argentina’s G20 presidency had prioritized several issues: the future of work, a sustainable food future, infrastructure for development, and gender equality. Commitments on all these appeared in the final communiqué. Also included were the need to reform the World Trade Organization (WTO); the commitment to fight climate change—albeit without the United States in the Paris Agreement—the fight against corruption; south-south cooperation; and migration.

"For Macri, this was an excellent opportunity to deepen his strategy of reinserting Argentina into the world."

In addition, the highly anticipated bilateral meeting between U.S. President Donald J. Trump and Chinese President Xi Jinping was even more successful than expected. The result—a ninety-day trade war truce while negotiations continue and a halt on further tariffs—was a huge success for the Argentine G20. The overall peaceful and friendly atmosphere that surrounded the summit paved the way for the United States and China to agree to this truce. Consensus on the need for future dialogue despite differing opinions was therefore the most salient feature of the Argentine G20.

The summit was also crucial for putting the international spotlight on Argentina, portraying the current administration as open to globalization, multilateral dialogue, and consensus at a time when other countries are turning away from these important principles. For Macri, this was an opportunity to deepen his strategy of reinserting Argentina into the world, holding bilateral meetings and signing agreements to attract foreign investments to generate much-needed income.

As the summit gathering demonstrated, the challenges to multilateralism are many, and in these uncertain times one thing remains clear: consensus-building is crucial. In this sense, the Buenos Aires summit will be remembered for reinserting multilateralism and sustainability into the discourse and objectives of the G20.

Global Memos are briefs by the Council of Councils that gather opinions from global experts on major international developments.